Limited-service brokers are licensed brokers who offer their seller-clients something different from the traditional full range of brokerage and related administrative services. These brokers may provide little or no property marketing or brokerage services other than submitting the property listing to the Multiple Listing Service (MLS). The seller then is obligated in the listing to pay a co-broke fee to any cooperating broker who procures the buyer. Fee-for-service brokers, on the other hand, offer different levels of services, and may or may not provide other marketing services, provide forms, look for information, assist with disclosures, conduct showings, participate in negotiation, help with offer implementation and render closing assistance. Be sure to also see the more extensive discussion of limited-service listings in the November 2004 Legal Update at www.wra.org/LU0411.
The following are some recent Legal Hotline questions regarding limited-service brokerage.
Solicitation of sellers
When the MLS sheet says to contact the owner for showings or the sign on the property has the owner's phone number (limited-service listing), does a broker have the right to solicit these sellers? If the broker drafts an offer, does he or she present it directly to the seller?
If there is a limited-service listing, the broker should contact the limited-service broker for further information about the type of listing and the procedure for presentation of offers. The National Association of REALTORS® (NAR) Code of Ethics, in Standard of Practice 16-4, indicates that, "REALTORS® shall not solicit a listing which is currently listed exclusively with another broker. However, if the listing broker, when asked by the REALTOR®, refuses to disclose the expiration date and nature of such listing; such as an exclusive right to sell, an exclusive agency, open listing, or other form of contractual agreement between the listing broker and the client, the REALTOR® may contact the owner to secure such information and may discuss the terms upon which the REALTOR® might take a future listing or, alternatively, may take a listing to become effective upon expiration of any existing exclusive listing."
Contract forms
Does the WRA have a designated form for limited-service listings or would a limited-service broker use a residential listing contract exclusive right to sell?
Licensees are required to use the Department of Regulation and Licensing- (DRL) approved listing contracts, which they may modify to fit their business models.
Trust accounts
Where is the earnest money deposited in a limited-service transaction? Could a limited-service broker specify that earnest money be held in the trust account of the procuring broker?
The approved listing contract forms do not require the listing broker to hold the earnest money. (For an example, see lines 96-97 of the WB-1 residential listing.) A limited-service listing may provide that the broker will not hold the funds and that the seller will modify the terms of the DRL-approved offers to purchase to make other arrangements when negotiating the offer. The listing may specify that the seller will modify or counter any offers to provide that the earnest money be held in the cooperating broker's trust account.
Limited-service fees
Can a limited-service broker request his or her commission (flat fee) up front?
Yes, a listing contract may be modified to provide for a flat fee that is paid upon the taking of the listing. This is similar to the retainer fee sometimes charged by buyer's brokers.
MLS compensation
Must a commission be offered to other agents, or can a MLS listing indicate that cooperation is offered only to buyer's agents and not offer any compensation?
The MLS is a means by which participants make unilateral offers of compensation to other MLS participants acting as subagents and/or buyer's agents. (See Section 1.2, Handbook on Multiple Listing Policy.) Thus, a limited-service broker could offer cooperation and compensation to buyer's brokers only. However, NAR's MLS Policy requires that compensation be offered, "shown in one of the following forms: 1. by showing a percentage of the gross selling price 2. by showing a definite dollar amount." Additionally, MLS policy states that the MLS shall not publish listings that include general invitations by listing brokers to other participants to discuss terms and conditions of possible cooperative relationships. (See Statement 7.23, Handbook on Multiple Listing Policy, 1999.)
A buyer's agent writes an offer on a property that has a For-Sale-By-Owner (FSBO) sign in the front yard but is in the MLS with a limited-service broker. Can the agent write in the offer that they would like a higher commission to be paid by the seller on behalf of the buyer?
A buyer's agent may negotiate the buyer-agency fee in the WB-36 Buyer Agency/Tenant Representation Agreement. The buyer may then negotiate the offer to purchase to have the seller pay the buyer-agency fees on behalf of the buyer. Whether a buyer's agent might be able to negotiate directly with the seller depends on the terms and conditions of the listing. With the listing broker's consent, a buyer's agent may negotiate with the seller directly and enter into an agreement to provide non-brokerage services to the seller for a fee.
Agency and procuring cause
An owner conducted the open house for a listed property, which the MLS says is not a limited-service listing and not an exclusive agency. A cooperating agent took the buyer on a showing. If the agent brought the buyer back on a second showing, who has procuring cause? Can the agent change over to buyer agency?
Pursuant to § RL 24.07(8)(a)3., a selling agent switching to buyer agency must disclose the change in representation to the listing broker and the seller. In addition, the written consent of the seller must be obtained if the agent is to become a buyer's agent.
The agent may enter into a WB-36 Buyer Agency/Tenant Representation Agreement to represent the buyer in this transaction, but this does not guarantee that the agent will be compensated by the listing broker. Because the buyer first communicated with the listing broker and the seller about the property, there may be a procuring cause issue.
Is this a broker?
A broker is marketing homes on a FSBO website and acting on behalf of sellers. (Only the broker's phone number and an email address are listed on the FSBO site as contact information — not her name, address, etc.) She refused access to a home to one of a broker's buyer clients. She says she is licensed, but does not have a listing contract with the seller. Is the broker providing brokerage services without a contract? Although she calls herself a marketing coordinator or specialist, wouldn't this situation still require a limited-service listing of some sort?
State statutes and the administrative code rules may be violated in this situation, depending on the activities undertaken by the licensee. The broker's name or a trade name previously filed with the DRL must appear in all advertising, per Wis. Admin. Code § RL 24.04. To provide brokerage services, including advertising or negotiating the sale of real estate, the real estate licensee must have written authority to do so, in other words, a listing contract. See §§ RL 24.025, RL 16.04 and RL 16.05.
Copies of documents
Can a limited-service listing broker specify to all cooperating brokers that, as a part of their acceptance of his or her MLS offer of cooperation and compensation, they must provide the listing broker with a complete copy of the offer to purchase and the closing statement upon closing?
According to Wis. Admin. Code § RL 15.02(b), brokers are required to promptly distribute exact and complete copies of all offers, amendments, counter-offers, exchange agreements and options that have been accepted and signed by all parties to the seller, buyer, listing broker and selling broker. However, § RL 15.03(1) requires the listing broker or his or her designee to ensure that complete copies of the seller's portion of the
closing statement is delivered to the seller and a complete copy of the buyer's closing statement is delivered to the buyer.
The MLS offer of compensation cannot be unilaterally modified to require delivery of other transaction documents by cooperating brokers. The listing broker may, however, negotiate with other MLS brokers to change the MLS offer of compensation in such a manner using a bilateral policy letter. See Legal Update 02.01 at www.wra.org/LU0201 for more information about policy letters.
Editor's note: The DRL became the DSPS in 2011. Information above may not be current.